Best Practices: Pricing for Efficient Urban Development

August 12, 2014

by Pamela Blais on…

Perverse Cities provides many examples of best practices across a range of pricing mechanisms and other kinds of policies that affect urban development patterns. I thought that it would be useful, as new examples of pricing best practices emerge, to share information on them here. This page will be added to as new best practices are developed and implemented.

If you have your own examples of pricing practices that encourage efficient, sustainable urban development patterns, please feel free to submit them using the comment box below. If you do, please be concise, and clear as to what the pricing instrument is (e.g. taxes, utility rates, development charges or impact fees, user fees, etc.), how it is structured, in which locale it was implemented, and if there is any empirical evidence as of yet on its impact on the ground. A link for further information would also be useful.

Kitchener, Ontario – Stormwater User Fee

The city of Kitchener, Ontario (population 225,000) introduced a new stormwater management user fee in January, 2011. The structure of the fee is exemplary because it relates the prices charged explicitly to cost causation, that is, how much stormwater a given property is likely to generate. Impervious area is what causes runoff and creates the need for stormwater management infrastructure. So the fees are linked to the amount of impervious area related to the development. They are calculated using the roof area, adjusted to include consideration of other paved areas such as driveways and patios.

For example, a small detached house, with a footprint of 105 sq.m. or less pays a monthly charge of $6.30, while a large house with a footprint of 237 sq.m. or more pays $13.80. Non-residential properties are charged on the basis of impervious area.

Tying fees directly tied to cost causation is an efficient approach that provides an incentive to keep impervious areas to a minimum, moderating the need for expensive municipal infrastructure. Credits are under consideration for those who install on-site controls that reduce stormwater flow into the municipal system.

Overall, a smart approach.

One quibble though. Multiple residential buildings (more than five units) are charged according to the number of units. Given that in multi-unit apartment or condo buildings the footprint/roof area relates to the number of units on a single floor rather than the total number of units in the building, this seems like yet another instance of overcharging multiple residential buildings, particularly buildings with many units and small floorplates. This creates another disincentive to denser development. Why not charge based on the number of units on one floor, or on a measurement of the actual impervious area as is done with non-residential buildings?

Nottingham Workplace Parking Levy

The City of Nottingham, in England, has adopted a Workplace Parking Levy to take effect in 2012. Employee parking is charged, but the charge is levied on the employer, where 11 or more parking spaces are provided. The proceeds of the levy, which amounts to about £250 per year per liable parking space, rising to about £300 per year in 2015, will directly fund a package of transport improvements, including two new tram lines. It is anticipated that it will raise £14 million per year on average. The levy was the result of an extensive public consultation process, and is the subject of a sophisticated communications effort. Nottingham is a city of 300,000, with a population of 667,000 in the Greater Nottingham area.

For more information go to the City of Nottingham’s Workplace Parking Levy webpage by clicking HERE.